Time to wrap up our series on the presidency
of Gerald R. Ford, from an economic standpoint, with
the tale of New York City and its dire financial crisis.

As
I noted earlier, Ford was a veto machine, 66 in all
and most of which involved rejecting Congress's requests
for more spending. So as a fiscal conservative it
shouldn't be surprising that when New York City encountered
severe budget problems, Ford was less than sympathetic.
The president had earlier vowed "to veto any bill
that has as its purpose a federal bailout" and New
York fit the bill.

For
much of 1975 New York City stood at the brink of financial
collapse. The cost of its social programs was overwhelming
and there was zero budget discipline, though in this
regard New York was hardly alone as other big urban
areas faced a similar plight.

Default
seemed a certainty and rural America took satisfaction
in the idea the "chickens had come home to roost"
when it came to big city profligacy. Gerald Ford assumed
the role of Middle America's president. After all
this is the man who once said "If the government is
big enough to give you everything you want, it is
big enough to take away everything you have."

From
"The Century":

"The
decision not to aid New York was one in which Ford
had properly gauged the national mood: Many Americans
were gleeful to see the nation's premier metropolis
in trouble, for they had come to see the city in general
(and New York in particular) as a symbol of excess
and waste, a monument to failure. And they had declared
their new loyalties with their feet, moving away in
large numbers from the Northeast, which most represented
this rusty, discredited urban view of the world, and
toward the 'Sun Belt' states of the South and West."

While
local officials scurried for a solution, Ford promised
to veto a bailout of the Big Apple. It was the finality
of his statement, though, that convinced the New York
Daily News to plaster this famous headline across
its front page:

"FORD
TO CITY: DROP DEAD."

Ford
simply saw his move as being the right thing to do
and something that would encourage New York to straighten
out its books.

But
while reaction was positive in the heartland, as time
went on others saw problems in permitting New York
to collapse. Former New York governor and now vice
president, Nelson Rockefeller, openly suggested the
federal government might have to step in. Treasury
Secretary William Simon echoed the sentiment.

From
"The Presidents":

"Ford
held to his stern justification that he was forcing
New York to restore its own fiscal viability, but
at the same time, his retreat had become inevitable.
Within the city, frantic negotiations took place involving
all parties, including banks that had funded the city's
short-term securities. Under the pressure, all interested
parties came together during additional weeks of negotiations.
Drastic reductions were made in the city's work force.
Bankers restructured bond issues. The new Municipal
Assistance Corporation was established to sell securities.
Union pension funds were committed to their purchase.
One near disaster after another was averted in a series
of cliff-hanger scenarios.

"Finally,
with the city seemingly acting to repair the damage
and the broader consequences of a default becoming
clearer, Ford changed his stance when he met the press
on 26 November. 'I have, quite frankly,' he announced,
'been surprised that they have come as far as they
have.' Ford then asked Congress to approve federal
loans to the city on a seasonal basis through 30 June
1978. He covered his own retreat by emphasizing that
New York had 'bailed itself out.' Finally, by a narrow
margin in the House, Congress approved Ford's request
for a seasonal financing act to provide up to $2.3
billion for short-term loans during the next three
years at 1 percent above the federal cost of money.
To further fortify the city against default, in case
that assistance failed to work additional legislation
was enacted to facilitate municipal bankruptcy proceedings
so that New York and other cities could adjust repayment
of their debts. Ford's position, combined with local
and federal measures, induced some painful cutbacks
but did start the process of rehabilitating New York's
finances."

New
York was saved! And as I noted in an earlier piece,
by 1976 the U.S. economy was beginning to turn around
as inflation eased. Ford continued to hammer away
at his message that a variety of social programs needed
to be paired back, which he did by combining 59 of
them into four block grants, and while he proposed
catastrophic health insurance for everyone covered
by Medicare, he ruled out a comprehensive national
health plan.

Early
in 1976 a poll found overwhelmingly Americans thought
Gerald Ford was "a nice guy," but by a big margin
they had also concluded "he does not seem to be very
smart about the issues the country is facing." ["The
Growth of the American Republic"]

Ford
also filled you with the sense he couldn't be taken
seriously. With his well-documented pratfalls, he
was viewed as "a joke" in some quarters. "He fills
the mind with the sense of how ordinary he is and
how vulnerable," wrote Murray Kempton in Harper's.
Ford's own pollster, Robert Teeter, "found that when
asked what the president had done that was particularly
impressive, 61 percent replied, 'Nothing,' which is
exactly what 41 percent said when asked what he had
done that they did not like. Advised Teeter, 'There
is no clear perception of his presidency, of his goals,
of where he is going." ["The Presidents"]

Nonetheless,
after trailing Democratic nominee Jimmy Carter by
as much as 56 to 33 percent following the Democratic
Convention, Gerald Ford fought back, only to narrowly
lose the election in the fall, 50 to 48 percent and
just 297 to 240 in the Electoral College. Without
a doubt, the pardon of Richard Nixon was the difference-maker.

Writing
these pieces the past few weeks, though, I've wondered
how Ford would have reacted to the scandals in the
corporate boardroom, including the latest on the egregious
practice of backdating stock options. Not real well,
we can assume. And a belated Happy Birthday, Mr. President...Ford
turned 93 on July 14.

Sources:

"The
Oxford Companion to United States History," edited
by Paul S. Boyer
"The Presidents," edited by Henry F. Graff
"The Century," Peter Jennings and Todd Brewster
"The Growth of the American Republic," Samuel Eliot
Morison, Henry Steele Commager, William E. Leuchtenburg
"America: A Narrative History," George Brown Tindall
and David E. Shi

Wall
Street History returns next week.

Brian
Trumbore

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